It’s been a good year for home buyers, says ROGER TAN as a slew of Bills has
been passed to protect their interest.

OVER the last two weeks of the December parliamentary session, the Dewan Rakyat
and Dewan Negara passed three important Bills to amend the Street, Drainage and
Building Act 1974 (Act 133), Housing Development (Control and Licensing Act 1966
(Act 118) and Strata Titles Act 1985 (Act 318).

A new Building and Common Property (Maintenance and Management) Bill 2006 was
also passed. These four Bills will become law when the ministry fixes a date for
their coming into force, after the Yang di-Pertuan Agong’s assent.

These are important legislation intended to protect the interest of property
owners and the public ought to be aware of them.

First, due to the misconduct of some Klang Municipal councillors who built their
mansions without approval, Section 70(13) of Act 133 is now amended to increase
the penalties to a fine not exceeding RM50,000 or imprisonment for a term not
exceeding three years or both, and the convicted person shall also be liable to
a further fine of RM1,000 for each day the offence is continued after
conviction.

Currently, the penalty is only a paltry fine of not exceeding RM10,000, without
any imprisonment, and the further fine is fixed at RM250 per day if the offence
continues after conviction. This amendment is, therefore, timely as the
penalties under Section 70(13) have never been increased since Act 133 was
enacted some 30 years ago.

The other key amendment to Act 133 is the abolition of certificate of fitness
for occupation (CFO).

In its place is the certificate of completion and compliance (CCC), issued by an
architect or an engineer or a registered building draughtsman ("principal
submitting person") instead of the local authority.

This will be a welcome move, as there are often complaints of local authorities
being tardy in issuing the CFO and imposing other unrelated conditions before it
can be issued.

With this move, the government is obviously removing red tape by letting the
housing industry self-regulate the delivery of completed buildings as the
developers can now time the delivery of vacant possession together with the
issuance of the CCC.

Currently, even though vacant possession has been delivered (to avoid late
delivery charges), a buyer can only enter and occupy his property after the CFO
has been issued.

Further, owners can now have direct recourse against the principal submitting
person for any negligence in issuing the CCC as local authorities enjoy a
general statutory immunity from any suit.

It is, therefore, hoped that the respective professional bodies will maintain
high standards and regulate strictly the conduct of their members when issuing
the CCC.

This is important because anyone guilty of producing a false or fraudulent
certificate or anyone who uses it, shall be liable to a fine not exceeding
RM250,000 or to imprisonment for a term not exceeding 10 years or both.

This is also reinforced by an amendment to Act 118, which makes it an offence
for any architect or engineer and any person who aids and abets them to issue a
progress certification knowing that work has not been completed in accordance
with the sale and purchase agreement (S&P).

However, in the public interest and if it appears a building has been erected
without compliance with the approved building plans or provisions of Act 133,
the local authority may issue a notice to the principal submitting person
requiring such non-compliance to be rectified and to direct the withholding of
the issuance of the CCC until such non-compliance is rectified.

But it is hoped that this reservation of right given to the local authority will
not be used by overzealous local authority officials to delay the issuance of
the CCC.

Apart from plugging loopholes in existing laws, the Housing Development (Control
and Licensing) Amendment Bill 2006 has introduced some fundamental changes in
regulating the housing industry.

The amendments will encourage developers to adopt the build-then-sell (BTS) and
10:90 concepts. Under the 10:90 concept, the purchaser only pays 10 per cent of
the purchase price upon execution of the S&P, with the balance to be settled
only after completion of the building.

This is made possible as the amendments will empower the minister to exempt any
housing developer or housing accommodation from the provisions of Act 118.

In other words, those developers who do not switch to the BTS concept but still
adopt the sell-then-build (STB) concept will continue to be subject to the
rigidity of certain provisions of Act 118.

The amendments are likely to come into force when new sets of standard statutory
S&P for BTS schemes are ready, while those who adopt the STB schemes will
continue to use the current Schedules G and H S&P.

The other salient amendments to Act 118 include:

• to expressly declare that Act 118, which is a piece of social legislation, is
enacted for the protection of the interest of purchasers

• the minister may prescribe from time to time the type of housing accommodation
to fall within the purview of Act 118, thereby dispensing with the need to go to
Parliament to amend the law each time a housing developer comes up with a new
type of housing accommodation

• the Controller of Housing will have the power to freeze any housing
development account if he has reason to believe that the developer is carrying
on his business in a manner detrimental to the purchasers or is contravening Act
118

• purchasers are now allowed to apply to the minister for approval to terminate
S&P within six months from the date of the first S&P and where 75 per cent of
the purchasers and the developer have agreed to the termination. The Amendment
Act also provides that the developer’s consent should not be unreasonably
withheld. Currently, only the developers can apply to the minister

• ex-judicial and legal officers can now sit as members of the Tribunal for
Homebuyer Claims

• the maximum amount of award based on each claim which the tribunal may make is
now increased from RM25,000 to RM50,000

• the minister can direct a company to take over the business of a housing
developer which is unable to meet his obligations to his purchasers or is about
to suspend his building operations or is carrying on his business in a manner
detrimental to the interests of his purchasers. Currently, the concurrence of
the Minister of Finance is required before this power may be exercised

• a home buyer can now sue the developer directly without the need to obtain the
consent of his financier by notifying his financier within 14 days after he has
filed the suit against the developer. The Amendment Act also provides that this
provision will have retrospective effect

• a new Section 22D has been introduced to pave the way in which properties
without individual titles are conveyed and sold to new purchasers. Currently,
whenever a purchaser intends to sell his property where the title has not been
issued, he will have to execute a document known as an assignment. The new
section provides that the developer’s consent to the assignment is not
necessary. All the purchaser needs to do is to notify the developer of the
assignment when he sells his property

• any lawyer who releases any money which he holds as a stakeholder to a housing
developer in breach of the S&P will, on conviction, be liable to a fine of not
less than RM10,000 but not exceeding RM100,000 or to imprisonment for a term not
exceeding five years or to both.

Likewise, any person who aids and abets the stakeholder will face similar
punishment if found guilty.

As regards the Building and Common Property (Maintenance and Management) Bill,
parcel owners will now have a say in the way their building and common property
are managed and maintained before the management corporation is established.

The amendments to Act 318, on the other hand, now recognise horizontal
ownership, that is, lands may be subdivided into separate strata titles so that
a management corporation can also be established for buildings like bungalows
built within a gated community.

With this note, 2006 has been a good year for home buyers. Of course, much now
depends on the enforcement of these laws before these legislative aims and
benefits can be realised.

Minister of Housing and Local Government Datuk Seri Ong Ka Ting ought to be
congratulated for taking many bold steps during his tenure to bring about many
changes to the laws for the protection of home buyers.

The writer is a member of the Legislative Drafting Committee of the Ministry
of Housing and Local Government. He is also the chairman of the Coveyancing
Practice Committee of the Malaysian Bar Council.

Comments (1)

Stephen Tan Ban Cheng: UNIFORM ENFORCEMENT NEEDED

This is a welcome development for all Malaysians who are bound to buy at least a house or an apartment in their lifetime in this home-owning country.

The statute provides a hitherto absent insurance for them against their investment which, for many, will mean the investment of their lifetime. And it comes with no premium charged.

As with almost all statutes in Malaysia, what is lacking is enforcement and uniform enforcement of the statute.

An enforcement without discrimination will mean that the developers, especially the fly-by-night operators who give them a bad name, will buck up and ensure that their end-products are not jerry-built.